I think this is a valid exercise, but it needs to be pointed out that when horizontal, maximum contact wells are used, there is no depletion curve. Once the oil/water contact is passed and water cut (percentage of produced water) exceeds the economic limit, the well is toast. There is No, zero, none, nada further production to give a backside curve. You cannot put this type of well on stripper production.(Which is production where the residual oil is pumped out of the ground by a small donkey engine, typically).

The same holds true to a large extent for CO2 injection - when injection costs exceed set profit margins, then there is no more injection, and the field is done. Again, no depleting curve on the backside, and you cannot put this type of field on stripper production. ... (11 August 2005)More esssential (well, how about 'nontrivial'?) reading from the Oil Drum. LJ

Looking ahead: oilWilliam F. Buckley Jr., Yahoo!News Raymond J. Learsy has written a book memorable in the special sense that nightmares can be memorable, but also useful. If the nightmare is that you died of an overdose of drugs, and the memory of it causes you when in command to draw back from the marginal dose, then the nightmare has served a purpose. Raymond Learsy writes (his book is called "Over a Barrel: Breaking the Middle East Oil Cartel") about what could happen if we continue to go as we are going.

...The rise in oil prices is not a fancy of Ray Learsy, and the unpredictability of that rise manifestly requires self-protection. How? Again, paraphrasing the author: First, we must cut back energy usage by taking steps to control demand (just as OPEC works to control supply). Second, we must become energy self-reliant.

We should use the Strategic Petroleum Reserve (700 million barrels) to douse incendiary shoots of inflationary fire. Those uses of national oil would be loans, not grants, repayable in kind when the price of oil has stabilized.

We will need to encourage alternative energy sources while adopting a voucher-based gas-distribution program. (12 August 2005)Welcome to the Big Tent of Energy Awareness, long-time conservative William F. Buckley Jr.

Coming closer to the tipping point...V. Anantha Nageswaran, The Financial Express (India) ...[the continued health of the world economies] has caused many to dismiss the rising price of crude oil as merely a nuisance. That may be a dangerous folly. That it has not had any apparent effect on global economic activity doesn’t mean that it would cease to matter forever. The truth is that we do not know the tipping point, except in hindsight. It would be entirely reasonable to state that with every dollar rise in the price of crude oil, we get closer to, and not farther away from, that tipping point.

However, to reiterate, it need not necessarily end this way. There would be room for optimism if more governments decide to pass on their higher energy bill to their consumers. If only the US government added an energy conservation tax and allowed the prices of gasoline to rise, not only would it keep more of the spending by its population, instead of sending it to OPEC governments, it would also allow the price of energy products to drop significantly. Thailand has removed diesel subsidies. This might have temporarily sent the consumer pri-ce inflation rate soaring, but it would also surely help to restrain aggregate demand in the economy, as it responds to the price signal. Indonesia swallowed the bitter pill, but only partially, in March. Unfortunately, it has postponed another price increase to January, fearing popular backlash.

In this regard, the pusillanimity shown by the Indian government in raising the prices of petroleum products causes deep concern. It has not only raised the possibility of immiserising its oil companies, it also does not allow the consuming public to make informed decisions on energy consumption. That administered prices have been decontrolled has no meaning, given the government’s tight grip over price-setting. What the country needs is a comprehensive energy policy, with accent on alternative energy sources, dovetailed with a policy on public transportation. The hydrocarbon-based development model has clear economic, social and environmental costs.The writer is the founder-director of Libran Asset Management (Pte) Ltd, Singapore. These are his personal views (13 August 2005)

Tick Tick TickBig Gave, Peak Energy (Australia) For some end of the week fear mongering, I wonder, is an attack on Iran likely ? A major disruption to oil supply from the gulf at this point would provide a shock that the world economy would not take well, so some observers consider it pretty unlikely and all the sabre rattling to simply be a way of keeping pressure on the Iranian leadership rather than a genuine push to commence military operations. Of course, you never know with the neocons - the idea that the rest of the world (particularly the Chinese) would not be willing to stand for an invasion of Iran could be their idea of a challenge rather than something to be concerned about.

...In summary - things seem to be speeding up lately - the markets are running every day, there is more peak oil related news than I have time to read and think about (Energy Bulletin must be posting 10 times as much stuff as it was at the beginning of the year) and the political side of things looks increasingly ominous. (12 August 2005)

Reality behind the oil gameGwynne Dyer, Trinidad & Tobago Express ...[Oil companies] just know that prices always fluctuate, that swings in commodity prices tend to be much wider than in other goods- and therefore that "running out of $40 oil" doesn't mean that the oil price will never fall below $40 again. It won't stay down there for good, but as John Maynard Keynes once remarked, "markets can remain irrational longer than you can remain solvent". You have to be able to make a profit from your new field when oil drops to $30 a barrel (even if it is for the last time) and stays there for a couple of years.

The price of oil may hit $80 or even $100 this year, but if it does it will be an extreme market fluctuation, not a new average price. It will eventually fall back towards the $40-$55 band-but "eventually" is the key word as far as the current global economic boom is concerned.

...Oil prices have gone up around $30 in eighteen months-one and a half per cent off the growth rate... If the oil price stabilised now, the world economy would still be growing at a comfortable three per cent after the rest of the damage feeds through.

If, on the other hand, oil goes up to $100 and stays there for a year or two, that's another two per cent off the growth rate, and then everybody hurts. The current growth spurt is bound to end sooner or later-they haven't abolished the economic cycle yet-but sharp swings in the oil price don't necessarily mean that we are headed for an especially severe recession. Nor have we any reason to think that the oil price will stay up in the stratosphere forever.

...After all the current turmoil is past, the important thing is that the median oil price for the next half-decade, say (until we run out of ALL the $40 oil) will be in the mid-$40s. That is good news in terms of the real crisis, climate change.

It's high enough to encourage energy conservation and drive people towards alternative, preferably non-carbon energy sources, but it doesn't actually paralyse the economy. We will need more pressure from a higher price later on if we are to avoid a global climate disaster, but the economy can only respond so fast. And we are practically guaranteed a higher price later on-another doubling of the average price by 2010 or 2012, say-because we are probably at peak oil production right now.Gwynne Dyer is a London-based independent journalist whose articlesare published in 45 countries. (13 August 2005)A nuanced view of oil prices. As Dyer points out, it is possible that oil prices will drop in the next few years, before they embark on their final rise to the stratosphere. It's important not to be snookered if this happens. One quibble with Dyer -- it's already too late to avoid global warming, since we have already generated the gases that are causing it (there is a long time lag between generation and effects). -BA

The hike in oil prices: Peak Oil or price cycle?Dan Percival, The Edge Daily (Malaysia) ...An English friend once remarked that Malaysians live in a paradise. In Europe, if energy supplies are disrupted, people die due to the severity of the weather. No such dire consequence exists here.

Also we are shielded somewhat from the world oil market by our own oil supplies. In other words, a 'Petronas subsidy' that will let us continue our easy lifestyle even in a tight oil market.

But it is important to remember that our oil supplies are limited and not likely to shield us for more than a decade into the future.

So the most important point to be made here is that in a decade, we will be fully exposed to the caprices of the external oil market, and the time is now to use oil monies gleaned from our dwindling reserves to prepare for the future.

...Some have accused America for a lack of a coherent energy policy for the future. Is Malaysia any better? Do we have the political will and foresight to create such a plan for a very possible 'end-of-the-oil-age' future or are we going to wait until our hand is forced?The writer is the Senior Data Processing Officer at the Malaysian Institute of Economic Research (MIER) (13 August, 2005)

Will America be ready when oil supply peaks?Steve A. Yetiv, Baltimore Sun (Op-ed) ... Analysts predict that the peak will occur between 2006 and 2011, that global oil reserves are far more limited than believed, partly because leading producers such as Saudi Arabia overestimate or obfuscate their oil reserves, and that we are headed for a massive energy crunch. Such concerns may be exaggerated, but we still need to plan ahead more zealously. This is because whenever peak oil does arrive, it will likely produce three effects for which we are not prepared.

First, in the absence of serious alternatives to oil, oil prices will spike possibly to more than $100 dollars a barrel in anticipation that demand for oil will slowly outrun supply.

... Second, the Middle East will become increasingly important as a supplier, making the world more vulnerable to its vagaries. ... Third, fears about peak oil may trigger conflicts among great powers. ... Studies show that we can take three actions of particular importance to try to avoid this future.

First, we must view the current energy plan as a starting point rather than as a finished product. It makes some advances but fails to address a key fact: 70 percent of oil is used in the transportation sector. To deal with that reality, we will need to increase taxes on oil consumption. ...

Second, we must publicize the possibility that the United States and the world economy are woefully unprepared for peak oil. This is vital because Americans, in particular, still see oil as an entitlement. America uses 25 percent of the world's energy and has only 5 percent of its population.

Third, we need to establish a set of norms that can help great powers - and civilizations, for that matter - avoid conflicts over oil.Steve A. Yetiv, professor of political science and international studies at Old Dominion University in Virginia, is the author of Explaining Foreign Policy. (12 August 2005)

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